Napa Valley, Land of Cult Wines, Faces Record Defaults

It is a vintage year alright for California's Napa Valley. Only, not the sort of vintage anyone there can be proud of. A combination of falling land values and changing consumer habits is forcing as many as 10 vineyards into foreclosure fire sales, according to a survey conducted by Silicon Valley Bank that was reported by Bloomberg. In 2008, there were none.

Defaults are also on the rise, underscoring the fact that no area has emerged unscathed by the recession, even one as rarified as Napa Valley, where hi-tech gazillionaires and other "gentlemen farmers" have pushed up land values to extremes in recent years.

Land values in the Valley are down 15 percent from 2007 -- although, compared to national rates, that's not so bad.

As with any commerical property, that makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan. Bloomberg cites data from San Diego-based research firm MDA DataQuick that tallies 18 winery and vineyard loan defaults in the twelve month period thought the end of January -- a fourfold rise.

And, while California produces 90 percent of all the wine in the United States, wineries in Oregon and Washington state are also up for sale. More than 30 if you include the ones in Napa Valley. This is the "most ever," one financial wine specialist tells Bloomberg. He blames too much debt and falling profit margins.

At the same time, the Great Recession has forced many wine lovers to switch to cheaper brands that are not produced in Napa, which is better known for pricey cult wines than value offerings.

"We have 250 vintner clients saying this downturn is the worst in 20 years," the manager of the bank's wine division tells Bloomberg.

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time to Think: The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years.